In the summer of 2008, I first noticed and began researching a sudden surge of terrorist activity in South Asia. One event that piqued my interest in particular was the bombing of the Marriott hotel in Islamabad, Pakistan. So I pulled up a chart of Pakistan’s stock market (see Figure 1 on page 6).

The Marriott bombing made sense from a socionomic perspective, because we know that social violence often tends to break out when equity prices have fallen for some time. In fact, acts of violence usually occur near lows. Al-Qaeda was suspected to be behind the Marriott attack. I decided to see whether other al-Qaeda attacks also were correlated to Pakistan’s mood as expressed by its stock market. The idea was that the leadership for the group was based in the mountains of this region, and perhaps the region’s social mood was influencing their decisions.

The event that came to mind first was 9/11—al-Qaeda’s notorious attack on the United States on September 11, 2001. Could it be that al-Qaeda’s most ambitious attack on a U.S. target also marked the end of this negative social mood period as expressed by this stock index? As the chart shows, it did. In fact, not only Pakistan but many stock markets in Asia were in bear markets while the U.S. and Europe boomed during the 1990s. As it turns out, those bear markets help explain the popularity of al-Qaeda leading up to 9/11.

Figure 1 shows other selected al-Qaeda attacks on American targets or targets perceived to be American. (The data is from infoplease.com, a division of Pearson Publishing.) You can see that al-Qaeda executed its first attack on an American target after the bear market of the early 1990s had ended. This was the 1993 bombing of the World Trade Center.

Figure 1

The group made its next major attack on a U.S. target during the 1996 decline, when it bombed a U.S. military barracks in Saudi Arabia, killing 19 people. Bin Laden then announced his fatwa against the United States near that 1996 low. But the most lethal attack of that bear market was right after the 1998 low, when al-Qaeda bombed the U.S. embassies in Kenya and Tanzania.

Following 9/11, during the bull market, attacks occurred during minor corrections within the advance. But those attacks were invariably of lesser degree and less lethal than those that had occurred during the bear market. Following one decline, in 2005, there was a particularly lethal attack on three American hotels in Jordan that killed 57 people. But you can see that as social mood continued to rise, the attacks basically dried up.

The 2008 decline led to the bombing of the Islamabad Marriott. And that of course made sense as well, because it was the largest, most lethal attack since 9/11, coinciding with the largest decline since 9/11. As prices have since rallied after the low, the few attacks that al-Qaeda has attempted have been of smaller degree, less lethal and in fact even unsuccessful. You may remember the underwear bomber who attempted to blow up Northwest Airlines flight 253 in late 2009. That attack occurred during a small correction.

The most important aspect of this chart may be indicated by the blue ovals. When stock prices have been rising for some time, terrorist organizations seem to find it difficult to attract and keep highly talented or highly skilled people, and there are no terrorist attacks. That’s the power of positive social mood.■

The
Socionomist is a monthly online magazine designed to help
readers see and capitalize on the waves of social mood that contantly occur
throughout the world. It is published by the Socionomics
Institute, Robert R. Prechter, president; Matt Lampert, editor-in-chief;
Alyssa Hayden, editor; Alan Hall and Chuck Thompson, staff writers; Dave Allman
and Pete Kendall, editorial direction; Chuck Thompson, production; Ben Hall,
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Matt LampertAnnual Meeting of the Academy of Behavioral Finance and Economics
Chicago, Illinois
October 17-20, 2018
Presentation: “Behavioral Finance is Bigger Than You Think: An Introduction to Socionomics”Details Forthcoming